Rollover IRA: Make the Right Move.

How does a "rollover" work?

There are direct and indirect rollovers. If you are changing jobs or retiring, you may be able to ask for a lump sum withdrawal from your employer’s plan. In a "Direct Rollover," you instruct your current plan to transfer the money, net of withholding, directly to a retirement account at another employer or institution. In an "indirect rollover," you take possession of the money, net of withholding, and have 60 days to "roll" the withdrawal into another retirement account to maintain its tax-deferred status. You may also, subject to certain limits, take a withdrawal personally from your individual retirement account (IRA) and move those monies (within 60 days) into a new IRA account,typically at a different financial institution.

How is a Rollover IRA different from an IRA account?

The IRA itself is no different; the difference is in the contribution amount. Traditional and Roth IRA contributions are subject to an annual contribution limit, but there is no limit to how much you can rollover or how much you can convert to a Roth IRA. Be careful not to confuse the unlimited rollover amount with the IRA annual contribution limit.

Can I roll my lump sum distribution into an IRA that I already have?

Yes. You can generally consolidate money from as many employer plans as you like. However, it’s sometimes a good idea to roll lump sum withdrawals from an employer’s plan into a rollover traditional IRA, keeping them separate from an IRA that contains nondeductible contributions.

Do I need to report a rollover on my tax return?

Yes. You will receive two tax forms — an IRS Form 1099-R reporting that you took a withdrawal from your former employer's plan and an IRS Form 5498 reporting that you made a rollover contribution to your IRA. Even if no portion of your rollover is taxable, you must report it on your tax return.

What if I need to use some of the money? Should I still roll over my lump sum withdrawal?

Yes. Rolling over the withdrawal will help preserve the value of your retirement savings. Under certain circumstances, you may be able to withdraw money from your IRA without penalty. There are a number of exceptions to the 10% early withdrawl penalty, such as qualified higher education expenses, qualified healthcare expenses over 7.5% of your adjusted gross income, health insurance payments if you’ve been unemployed for more than 12 weeks and certain acquisition costs when purchasing a first home. It is also possible to withdraw money from an IRA without a penalty if you take a series of substantially equal periodic payments over the course of your life expectancy. Your financial or tax advisor can help you with your particular circumstances.

If I already took the cash, can I still do a rollover?

Yes, if you've had the money for 60 days or less. Be aware that your employer withheld at least 20% of your distribution for federal income taxes already. To avoid paying taxes plus a possible 10% penalty on amounts withheld, you will have to fund the IRA with an equal amount from your own personal savings within 60-days of the original distribution. As with all tax matters, be sure to consult your tax advisor.

What do I do about company stock left in my employer's plan?

A withdrawal of employer stock may be subject to special, generally favorable, tax rules. You may generally roll the stock over to an IRA, but you would lose the opportunity to benefit from these special rules. You should consult your tax or financial advisor for more information.

Neither Huntington nor any agents or representatives are authorized to give legal, tax or accounting advice and this information is not intended to be considered as legal, tax or accounting advice. We suggest you consult your attorney, tax advisor or accountant on specific points of interest to you.

Huntington Funds are investment options only and are not providers of retirement plans.

Mutual funds are subject to risks and may fluctuate in value.